MARKETING NOTES

 Market: It refers to a set of actual and potential buyers of a product or service.

 Marketing:
Philip Kotler defined marketing as a social process by which individual groups obtain what they need and want
through creating offerings and freely exchanging products and services of value with others.
o Features of Marketing:
1) Needs and Wants – Marketing helps individuals get what they need and want and thus the primary objective
and focus of marketing is the satisfaction of individuals and organisations.
A need is a feeling of deprivation which if left unsatisfied will cause the individual to become unhappy and
uncomfortable. Needs are basic to all human beings.
A want is a need which is shaped by factors such as personality, culture, religion etc. They are culturally
defined objects which may potentially provide satisfaction.
2) Market Offering – A market offering refers to a complete offer of a product or service having given features
like shape, colour, size etc; at a certain price and available at certain locations. It is done on the part of the
marketers. A good market offer is one which is made after analysing the needs and wants of the potential
customers.
3) Customer Value – Marketing facilitates exchange of products and services between the buyers and the
sellers. However, customers decide on purchase based on their perception of the value of the product or
service in providing satisfaction, in relation to its cost. A product will be purchased only if it is perceived to
give greatest benefits or value for money. Good marketer should aim at adding to customer value so that
the customer will prefer the product or service over competing products.
4) Exchange Mechanism – The customers obtain what they need and want through the exchange process.
Exchange refers to the process in which two or more parties come together to obtain the desired product or
service from someone offering the same in return for something of value. Exchange is referred to as the
essence of marketing as it is done at all levels of distribution.
o Conditions for exchange are: a) Involvement of two or more parties.
b) Should be capable of offering something of value to the other.
c) Ability to communicate and deliver the product or service.
d) Freedom to accept or reject the other parties offer.
e) Willingness to enter into exchange with the other parties so acceptance and rejection is done on a
voluntary basis.

 What can be marketed? :

A product is a “bundle of utilities” or a “source of satisfaction” which can satisfy human needs and wants.
It is not only a physical object like pen, pencil etc. but also other things of value such as services, ideas etc.
A product is anything that can be of value to the buyer. It can be tangible or intangible.
~Services; Banking, Insurance ~Ideas; Blood donation by the Red Cross ~Persons; Election candidates
~Events; Sports events ~Place ~Physical objects ~Experiences ~Properties ~Information ~Organisations

 Who is a marketer? :
The person who takes an active part or role in the exchange process. Normally it is the seller who analyses the
needs, creates market offerings and persuades buyers. In certain situations, like of low supply where the buyer
has to persuade the seller, the buyer can be considered the marketer.

 Marketing Management :
Marketing management refers to the planning, organising, directing and control of the activities which facilitate
exchange of goods and services between producers and consumers. The primary objective is to achieve desired
outcomes with target markets. Marketers have to create and maybe restrict demand.
o Process: a) Choosing a target market.
b) Focus of the management should be on getting, keeping and growing the customers with respect to the target
market. The marketer has to create demand so that the target customers purchase the product, keep them
satisfied with the product and attract more customers to ensure growth.
 c) The mechanism for achieving the objective is creating, developing and communicating superior values to the
customers. A marketer should create superior values so that the customers are attracted to the products and
communicate these values to others and persuades them.

 Marketing and Selling :

o Differences: a) Part of the Process vs Wider Term – Selling is part of the Marketing process and is
concerned with transferring possession and ownership of goods and services from seller to buyer.
Marketing is a wider term which involves activities like identification of customer needs and wants,
developing products which will satisfy these needs, fixing prices and persuading potential customers.
b) Transfer of Title vs Satisfying Customer Needs – Selling focuses on transfer of title and possession of
goods from seller to buyer while the main focus of marketing is achieving maximum satisfaction of
customer’s needs and wants.
c) Profit through maximising Sales vs Customer Satisfaction – All selling activities are directed towards
maximising sales and thereby the profits of the firm. Focus is on profit maximisation through
maximisation of sales. Whereas, in marketing, emphasis is on customer satisfaction which leads to more
profits in the future. Thus, marketing treats customer satisfaction as a route to profit maximisation.
d) Start and End of the activities – Selling starts after the product has been developed while marketing
starts before the product is produced and continue long after the product has been sold.
e) Difference in the Emphasis – Selling emphasises on bending the customer according to the product
whereas Marketing focuses on developing the product and other strategies as per customer needs.
f) Difference in the Strategies – Selling involves strategies like promotion and persuasion while Marketing
includes strategies in respect of product, pricing, promotion and physical distribution.

 Marketing Management Philosophies :

o Production Concept – Profits could be maximised by producing on a large scale thereby reducing the
average cost of production. It was assumed customers would favour the products which were widely
available at affordable prices (availability and affordability). Focus was thus on improving production and
distribution efficiency of the firms.
o Product Concept – Emphasis of firms shifted from quantity of production to the quality of products.
Focus of business activities shifted to bringing continuous improvement in quality, incorporating new
features etc. Product improvement became the key to profit maximisation.
o Selling Concept – Focus of business firms shifted to pushing the sale of products through aggressive
selling techniques with a view to lure, persuade or coax the buyers to buy the products.
o Marketing Concept – Focus on satisfaction of customer needs is the key to success of any business firm
in the market. In the long run, profit maximisation objective can be achieved through identifying
customer needs and satisfying them in an efficient manner. The basic role of a firm according to this
concept is “identify a need and fill it”.
 Pillars of Marketing Concept : a) Identifying the market or customers who are chosen as the
target of marketing effort.
b) Understanding needs and wants of customers in the market.
c) Developing products or services for satisfying needs of the target market.
d) Satisfying the needs of target market better than competitors.
e) Doing all this at a profit.
o Societal Marketing Concept – Identify needs and wants of target market and deliver satisfaction in an
effective and efficient way so that the long-term welfare of the customers and society is taken care of.
Extension of the marketing concept which is supplemented by concerns for the long-term welfare of the
society. It also pays attention to social, ethical and ecological aspects of marketing other than customer
satisfaction.
 Functions of Marketing :
1) Gathering and Analysing market information – Important function of a marketer is to gather and analyse
market information. This is necessary to identity the needs of customers and take various decisions for
successful marketing of the products and services. It is important for making an analysis of the available
opportunities and threats and strengths and weaknesses of the organisation and to help decide what
opportunities should be pursued.
2) Marketing Planning – Develop appropriate marketing plans so that the marketing objectives of the
organisation can be achieved.
3) Product designing and development – Design of the product contributes to making the product more
attractive to the target customers. A good design can improve product performance in the market and give it
a competitive advantage.
4) Standardising and Grading – Standardisation is producing goods according to predetermined specifications
which helps with uniformity and consistency in the output. It ensures buyers that the goods conform to
predetermined standards of quality, pricing and packaging and reduces need for inspection, testing and
evaluating.
Grading is classification of products into groups on the basis of important characteristics like quality. It is
necessary for products which are not produced according to predetermined specifications. It ensures that
goods belong to a particular quality so higher prices can be realised for higher quality output.
5) Packaging and Labelling – Designing and developing the package for the product. It provides protection and
serves as a promotion tool. Many customers assess quality through packaging. Labelling is designing and
developing the label to be put on the package. Both are important and considered the pillars of marketing.
6) Branding – Decision of selling the product in its generic name (name of the product category ex. fans) or a
brand name (ex. Philips Bulb). Brand name creates product differentiation, basis for distinguishing between
own product and competitor’s product, which builds customer loyalty and promotes sale. Important
decisions include the branding strategy to be undertaken. Important role in the success of a product.
7) Customer Support Services – Developing adequate customer support services like after sales services,
handing customer complaints and adjustments, maintenance services etc. It aims at maximum satisfaction
for customers, which helps in bringing repeat sales and improving brand loyalty.
8) Pricing of a Product – Pricing refers to the amount of money customers have to pay to obtain a product. It is
an important factor affecting success or failure of a product in the market. Demand for a product is related
to its price. Lower priced products generally have a higher demand and vice-versa. Marketers have to
properly analyse factors determining price of the product and take crucial decisions including setting pricing
objectives, determining pricing strategies, determining the price and changing prices.
9) Promotion – Refers to informing customers about the firm’s product, its features etc. and persuading them.
4 important methods of promotion are advertising, personal selling, publicity and sales promotion. Marketer
has to take crucial decisions like deciding the promotion budget, promotion mix etc.
10) Physical Distribution – Two decisions under this are; a) Use of channels of distribution or marketing
intermediaries
b) Physical movement of product from place of production to a place where it is required for customers for
consumption.
Important decisions to be taken include decisions regarding managing inventory, storage or warehousing
and transportation of goods.
11) Transportation – Involves physical movement of products from one place to another. Since customers are
generally wide spread and geographically separated it is necessary for the products to reach the places
where it is needed for consumption. Firm has to analyse transportation needs, considering factors like
nature of the product, cost and location of the target market etc.
12) Storage or Warehousing – There is a time gap between production or procurement of goods and their sale
or use. May be because of irregular demand or supply. To ensure smooth flow of products in the market,
protect against unavoidable delivery delays or to meet contingencies in demand, proper storage is needed.
Storage function is performed by agencies like manufacturers, wholesalers and retailers.
 Role of Marketing :
o Role in a Firm – Crucial role in survival and growth of a firm. It emphasises that customer satisfaction is
key to survival and growth. It helps the firm focus activities on needs and wants of customers because a
satisfied customer is the most valuable asset of any firm.
o Role in the Economy – Marketing is a catalyst to economic development and improves standard of living.
Standard of living is related to per capita income of the average citizen. Marketing can inspire people to
take up new activities, set up enterprises etc. to provide necessary products in an economy. Ensures
smooth flow of goods as well.
Marketing helps in finding out right type of products and services to be produced, places where it should
be made available, price of the products and the distribution channels used to move products to the
ultimate place of consumption. This linkage between business and consumption centres accelerates
economic activity leading to higher income, consumption, savings and investments.

 Marketing Mix :
Set of marketing tools that a firm uses to pursue its marketing objectives in a target market.
Marketing decision affecting factors are; a) Controllable factors (ex. Price, distribution channel, packaging)
b) Uncontrollable factors – environmental variables (ex. Policy changes, rate of inflation)
For success, decisions on controllable factors need to consider environmental variables.

 Elements of Marketing Mix :

1) Product – Products are goods or services or anything of value which is offered to the market for sale.
Product concept includes not only the physical product but also the benefits offered by it from customers
view point. It also includes extended product or after sales services, handling complaints etc which are
important for customer durable products (Fridges, Automobiles). Important product decisions include
features, quality, packaging etc.
2) Price – It is the amount of money a customer has to pay to obtain a product. It affects the demand for the
good. Marketers have to set pricing objectives, analyse factors determining price and fix a price for the
product. Decisions have to be made regarding discounts to traders, customers etc. so customers think price
and value of the good are in line.
3) Place - Place or Physical Distribution include making products available to the target customers. Important
decisions include selecting intermediaries or dealers to reach the customers, providing them support
(discounts) and they will keep inventory of products, demonstrate them to potential buyers, negotiate
prices, close sales and also service products after sale. Other important decisions are regarding managing
inventory, transportation and storage or warehousing.
4) Promotion – Activities which communicate availability, features, merits etc. of the product. Most
organisations undertake many promotional activities and spend substantial amounts of money on
promotion through use of tools like advertising, personal selling and sales promotion techniques (ex.
Discounts).

 Product :
Anything that can be offered to a market to satisfy a want or need. Tangible and intangible attributes included.
o Classification of products :
1) Consumer Products
A. Shopping efforts involved
1. Convenience Products - Products which are purchased frequently and immediately with least efforts
and time. They have low unit value and are bought in small quantities.
Characteristics; a) Purchased at convenient locations with least efforts and time.
b) Have regular and continuous demand as they are usually essential products.
c) Small unit of purchase and low prices.
d) Have standardised price as they are usually branded products.
e) Competition is high as supply is greater than demand. Marketers have to heavily advertise.
f) Sales promotion schemes or short-term incentives are important in their marketing.
 2. Shopping Products – Buyers devote considerable time to compare quality, price, style, suitability etc. at
several stores before making the purchase.
Characteristics; a) Durable nature, survive many uses.
b) Unit price and profit margin is generally high.
c) Due to high unit price, customers compare products of different companies before purchase.
d) Purchase is usually pre-planned, less degree of impulse in purchase.
e) Retailers play an important role as persuasive effort is needed to convince potential buyers.
3. Speciality Products – Products which have special features and which people are willing to spend special
efforts and time to purchase. These products have reached a brand loyalty of the highest order. Demand
is usually inelastic i.e. Even if the price increases, demand does not fall.
Characteristics; a) Limited demand as a small number of customers purchase these products.
b) Generally costly and unit price is very high.
c) Available at very few places since number of customers is small and they are willing to take special
extra efforts to purchase.
d) Aggressive promotion is required to inform customers.
e) After sales services are important.
B. Durability of Products
1. Non-durable Products – Products which get used up in one or few uses. They command a very small
margin, need to be made available at many locations and need to be heavily advertised.
2. Durable Products – They survive many uses. Used for a longer period, command a higher per unit
margin, require greater personal selling efforts, guarantees and after sale services.
3. Services – Activities, benefits or satisfactions offered for sale. Intangible in nature.
Characteristics; a) Intangible.
b) Inseparable from its source.
c) Cannot be stored, highly perishable.
d) Highly variable as their type and quality depends on the person providing them. That is why there is
difference in the extent of satisfaction from services provided by different people.
2) Industrial Products – Used as input in production of other products. Meant for non-personal and business use of
producing other products.
o Characteristics;
1. Number of buyers – Limited number of buyers compared to consumer products. Ex. Sugarcane purchased by
few sugar producers where sugar is purchased by millions.
2. Channel levels – Few buyers, sale is made with short channels of distribution (direct selling or one-level
channel).
3. Geographic Concentration – Because industries are located in certain areas or regions, industrial markets are
highly concentrated geographically.
4. Derived demand – Demand is derived from demand of consumer products. Ex. Demand for leather comes
from demand for shoes or other leather products.
5. Role of technical considerations – Significant role in purchase of industrial products because these are
complex products used in business operations.
6. Leasing out – Growing trend in the industrial product market is to least out products instead of out-right
purchase due to high price.
o Classification
1. Materials and Parts – These are products which enter manufacturers products completely.
a) Raw material - farm products and natural products.
b) Manufactured materials and parts – component materials and component parts.
2. Capital Items – Used in production of finished goods.
a) Installations ex. Elevators
b) Equipment ex. Hand tools
3. Supplies and Business Services – Short lasting goods which facilitate developing or managing finished goods.
a) Maintenance and repair items ex. nails
b) Operating supplies ex. Office stationery
 Branding – Giving a name, sign, symbol etc to a product is called branding.
o Terms
1. Brand – A name, sign, symbol, term, design etc. given to a product of one or a group of sellers which
differentiates it from competitors products. Two components – brand name & brand mark.
2. Brand name – Part of a brand which can be spoken i.e. verbal component.
3. Brand mark – Can be recognised but is not utterable. Ex. Symbol, design, lettering etc.
4. Trade mark – Brand or part of the brand which is given legal protection from its use by other firms. The firm
gets exclusive right over the brands use.
o Advantages to marketers
1. Enables marking product differentiation – Allows firms to distinguish between their products and
competitors products. They can easily secure and control the markets for their own products.
2. Helps in advertising and display programmes – Branding aids in advertising and display programmes.
Without a brand name, an advertiser can only create awareness for the generic product.
3. Differential pricing – Branding allows firms to charge different prices for products than their competitors.
This is because if customers like a brand and are loyal and become habitual of it, they won’t mind paying
more.
4. Ease in introduction of new product – If a new product is introduced under a brand name, it enjoys the
reflected glory of the brand and is likely to have an excellent start. This is why many companies decide to
introduce new products under existing brand names.
o Advantages to customers
1. Helps in product identification – Helps customers identify products of the same brand. So, if they are
satisfied in the brand, they don’t need to inspect much. Branding helps in bringing repeat sales.
2. Ensures quality – Brand ensures a certain level of quality. If any deviation, customers can have recourse to
the manufacturer or marketer which builds up confidence and increases satisfaction.
3. Status symbol – Some brands have become a status symbol due to their quality. Consumers of these brands
feel proud and enjoy satisfaction.
o Characteristics of a good brand name
1. Should be short and easy to spell, pronounce, remember and recognise.
2. Should suggest the products benefits and qualities. Should be appropriate to product functions.
3. Should be distinctive.
4. Should be adaptable to packaging and labelling requirements, to different advertising media and to different
languages.
5. Should be versatile to accommodate new products in the product line
6. Should be capable of being registered and protected legally.
7. Chosen name should have staying power i.e. should not go out of date.

 Packaging – Act of designing and producing the container or wrapper of a product.

o Levels of packaging
1. Primary package – Product’s immediate container. Some cases it is kept till the consumer is ready to use the
product ex. Plastic cover on socks, in other cases it is kept throughout the whole life of the product ex.
Toothpaste tube.
2. Secondary package – Additional layer of protection kept till the product is ready to be used ex. Toothpaste
box.
3. Transportation package – Further packaging component necessary for storage, identification or
transportation. Ex. A manufacture may send 100 toothpaste tubes in a box to retailers.
o Importance of packaging
1. Rising standards of health and sanitation – Standards are increasing and more people have started buying
packed goods as chances of adulteration are minimised.
2. Self-service outlets – Self service retail outlets are becoming more popular, some of the traditional role
assigned to personal selling has gone to packaging.
 3. Innovational opportunity – Recent innovational developments in packaging ex. Milk can be stored up to 4
days without refrigeration due to innovative packing materials, thus the scope of marketing for such
products has increased.
4. Product differentiation – Very important for product differentiation. Colour, material etc. changes perception
of consumers about quality of the product.
o Functions of packaging
1. Product identification – Greatly helps in product identification. Ex. Red package of colgate.
2. Product protection – Provides protection to the contents of the package from spoilage, damage, leakage etc.
Required during storage, distribution and transportation.
3. Facilitating use of the product – Shape and size of the package should make it convenient to open, handle,
and use for the consumers.
4. Product promotion – Helps in product promotion. Packaging may be used to attract attention of customers
and is especially important in self-service outlets.

 Labelling -Designing a label to be put on the product. Varies from a simple tag containing details to complex
graphics part of the package.
o Functions of Label
1. Describe the product and specify its contents – Most important function is to describe the product, its
usage, precautions, etc. and specify its contents. Ex. Ready to eat food package label contains directions to
prepare.
2. Identification of the product brand – Helps in identification. For ex the brand name on the label distinguishes
it from other brands. Other common identification information includes name and address of manufacturer,
maximum retail price, net weight, etc.
3. Grading of products – Label helps grade the products into different categories. Different grades are assigned
to indicate different features or quality of the product.
4. Helps in promotion of the product – Label attracts attention and gives reason to purchase. They can have
promotional messages on them or convey sales promotions. ex. 40% extra free written on labels.
5. Providing information required by law – ex. Packaged food material must have list of ingredients declaring
vegetarian or non-vegetarian food additives and date of manufacture. Hazardous or poisonous material
must have appropriate safety warnings.

 Pricing – Price is the amount of money paid by a buyer for purchase of a product or service. It is a regulator of
demand for the product and is a competitive weapon. It also is the single most important factor affecting
revenue and profits of the firm.
o Factors affecting price
1. Product cost – Important factor determining price is cost of producing, distributing and selling the product.
Cost sets the minimum or floor price. All firms aim at at least covering costs, otherwise it is difficult to
survive. They may also wish to earn a margin of profit over the costs. Costs include fixed costs, variable costs
and semi-variable costs.
2. The utility and demand – Utility from the product and intensity of demand of customer determine the upper
limit of price which is the maximum a buyer would be willing to pay. Buyer may be ready to pay up to the
point where utility is at least be equal to the sacrifice made in terms of price paid. Demand can be elastic or
inelastic. If demand is inelastic, firm is in a position to fix higher prices.
3. Extent of competition in the market – Price is affected by nature and degree of competition. Determines
price between lower and upper limit. If competition is low, higher prices. If it is high, lower prices.
Competitors price, anticipated reactions and features and quality of their products should be examined
before determining price.
4. Government and legal regulations – To protect the interests of the people against unfair pricing practices,
government can intervene. Done by declaring a product as an essential product and regulating its price. Ex.
A drug priced at 20, but buyer is willing to pay 200. In absence of competition, seller may increase price but
government can declare it an essential commodity and regulate its price.
5. Pricing objectives - Generally the objective is to maximise profits. For profit maximisation in the short run,
maximum price can be charged for a product. For the long run, lower per unit price can be charged to earn
profits through increased sales.
 Other pricing objectives are :- a) Obtaining market share leadership – They want a larger share in the market
so prices are reduced which would create more attraction and more people would purchase.
b) Surviving in a competitive market – If they are facing competition issues, they can use discounting or
promotion campaigns.
c) Attaining product quality leadership – Higher prices are charged to cover high quality and cost of
products.
6. Marketing methods used – Marketing elements like distribution channel used, promotion efforts involved,
credit facility, etc also have an effect on price. Uniqueness in any element gives more freedom in price fixation.
Ex. Free home delivery would provide flexibility.

 Physical distribution
o Channels of distribution – channels are a team of merchants, agents, and institutions that combine physical and
title movement of goods to specific destinations. Use of middlemen has benefits which are economy of effort,
cover large geographical area, efficient distribution, convenience to customers and authentic source of market
information.
 Functions of distribution channels
1) Sorting – Middlemen procure supplies from various sources which are often of different sizes, shapes,
quality etc. They then sort the supply into homogenous groups on basis of different factors like type, size
etc.
2) Accumulation – Goods are accumulated into larger homogenous stocks which helps in maintaining
continuous flow of supply.
3) Allocation – Breaking homogenous stock into smaller marketable lots according to requirements.
4) Assorting – Building assortment or combination of products for sale. There is usually a different between
product lines made by manufacturers and desired by users. Middlemen procure variety of goods and
deliver them in combinations desired by customers.
5) Product promotion – Promotion activities usually done by the manufacturer but middlemen also
participate in certain activities like demonstrations, contests, etc. to increase sales.
6) Negotiation – Middlemen operate between manufacturers and customers. Arriving at deals that satisfy
both parties is an important function. They negotiate with the customers so transfer of ownership is
properly affected.
7) Risk taking – Middlemen assume risks on account of price and demand fluctuations, spoilage, etc.
 Types of channels
1) Direct channel (Zero level channel) – Goods move from manufacturers to consumers. Straight and direct
relationship is established between manufacturer and consumer.
2) Indirect channels – Intermediaries are used.
a) One level channel (Manufacturer-retailer-consumer) – Retailers are used between manufacturer
and customer. Enables covering a wide market area and control over channels.
b) Two level channel (Manufacturer-wholesaler-retailer-consumer) – Commonly adopted for
consumer goods. Wholesalers and retailers act as connecting links. Enables covering a wide
market area.
c) Three level channel (Manufacturer-agent-wholesaler-retailer-consumer) – Manufacturers use
their selling agents or brokers who connect them with wholesalers then retailers. An agent is
appointed in each major area who contacts the wholesalers. Useful when there is a limited
product line and a wide market area to be covered.
 Factors affecting choice of distribution channel
1) Product related factors – Whether the product is industrial or consumer, perishable or non-perishable,
what is the unit of value and complexity. Industrial products are more expensive, made to order, and
purchased by few so require direct or shorter channels. Consumer goods are cheaper, less bulkier,
standardised, etc and can use a longer channel. Perishable goods -> shorter channel while non-
perishable goods -> longer channel. A higher unit value -> short channels, lower unit value -> longer
channels. More complex -> short channels and less complex -> longer channels.
2) Company characteristics – Financial strength and degree of control it wants to hold over channel
members. Direct selling requires huge funds in fixed assets while indirect selling does not.
 More funds -> direct selling, less fund -> indirect selling. More control -> short channels, less control ->
longer channels.
3) Competitive factors – The choice of channels of competitors in the same industry also has an affect. It
depends on whether the company’s policy wants to go with competitors or be different from them.
4) Market factors – Size of market, geographical concentration of potential buyers and quantity purchased.
Buyers are less -> short channels, more buyers -> long channels. If buyers are concentrated in one place
-> Short channels, buyers are dispersed -> long channels. Small size of order -> longer channel , large size
of order -> shorter channel.
5) Environmental factors – Economic condition and legal constraints. In a depressed economy, shorter
channels used to be more economical.

 Physical distribution – Physical movement and handling of goods from place of production to place of
consumption is called physical distribution. It is a very important element of the marketing mix. Activities in
physical distribution include transportation, warehousing etc.
o Components of physical distribution
1) Order processing – Order placement is the first step. Orders flow from customers to manufacturers. A
good distribution system will facilitate accurate and speedy processing of orders.
2) Transportation – Means of carrying goods from place of production to point of sale. Unless goods are
physically made available, sale cannot be completed.
3) Warehousing – Storing or assorting products to create time and utility in them. Needed because there is
a different between time of production and time of requirement for consumption. Lots of warehouses
will facilitate meeting customer needs faster but the cost would be high and vice-versa. There needs to
be a balance between cost of warehousing and level of customer service. Warehouses near the
production site are good for goods which need to be stored for a long time whereas bulky or perishable
goods use lots of warehouses near market points.
4) Inventory control – Important to decide level of inventory. It involves predicting demand for the product.
Higher the level of inventory, higher will be level of service to customers but cost of carrying goods will
also be high. Should be a balance between cost and customer satisfaction. Just-in-time-inventory
decision is becoming more popular.
 Factors affecting level of inventory
a) Firm’s policy regarding level of customer service to be offered – High -> more inventory
b) Degree of accuracy of sales forecasts – Accurate forecasts -> less inventory
c) Responsiveness of distribution system – If more time is needed to respond -> more inventory
d) Cost of inventory – Includes holding costs

 Promotion – Promotion refers to the use of communication tools in view of a twin objective of informing
potential customers about a product and persuading them to buy it.
 Promotion mix – Combination of promotional tools used to achieve a firms communication objectives.
o Advertising - Commonly used tool for promotion. It is an impersonal form of communication.
 Features
1) Paid form – Paid form of communication, sponsor bears cost of communication.
2) Impersonality – No direct contact between prospect and advertiser.
3) Identified sponsor – Undertaken by some identified individual or company who makes advertising efforts
and bears costs.
 Merits
1) Mass reach – Reaches over a vast geographical area.
2) Enhancing customer satisfaction and confidence – Provides confidence and assurance to customers
about quality allowing them to be satisfied.
3) Expressiveness – Developments in art, graphics, animation etc. has led advertising to be the most
expressive form of media. Advertisements are very attractive nowadays.
4) Economy – It is a very economical mode of promotion as overall costs are spread over a large
geographical area lowering the per-unit cost of reach.
 Limitations
1) Less forceful – Impersonal mode which means less compulsion on prospects to pay attention to the
message.
2) Lack of feedback – Effectiveness is hard to evaluate as there is no immediate and accurate feedback
mechanism.
3) Inflexibility – Messages are standardised and not tailor made for different prospects.
4) Low effectiveness – Volume of advertising is expanding which makes it difficult to make advertising
messages heard by prospects.
 Objections to advertising
1) Adds to cost – Opponents say it unnecessarily adds to cost of the product. However, it also helps
increase demand for the product which leads to higher production and thus, economies of scale.
Advertisement might add to total cost but the per unit cost comes down which lessens burden on
consumers.
2) Undermines social value – Opponents say it undermines social value and promotes materialism. Creates
discontent among people as they may get to know about new products and not be happy with their
present state. Some ads show new life styles which don’t find social approval.
This is not fully true as new products may be improvement over existing products which ensures
consumers aren’t using inefficient products. Final choice of to buy or not rests with the buyers.
3) Confuses the buyers – So many products are being advertised with similar claims that buyers may
become confused as to what is true and to be relied upon.
Supporters argue that humans are rational beings who purchase on basis of various factors and
that they can clear confusion by analysing information in advertisements and other sources
before purchase.
4) Encourages sale of inferior products – Doesn’t distinguish between superior and inferior products and
persuades people to purchase inferior products.
Superiority and inferiority depend on quality which is a relative concept. Advertisements sell
products of given quality and buyers will purchase if it suits their needs. However, no
advertisement should make fake claims regarding quality.
5) Some advertisements are in bad taste – Some advertisements show something that is not appropriate or
approved by people and can be offensive. Ex. Women dancing unnecessarily.